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What Should We Expect From Greggs plc's (LON:GRG) Earnings In The Next Couple Of Years?

Simply Wall St

The most recent earnings update Greggs plc's (LON:GRG) released in December 2018 indicated that the business experienced a robust tailwind, eventuating to a double-digit earnings growth of 16%. Below, I've laid out key growth figures on how market analysts perceive Greggs's earnings growth trajectory over the next couple of years and whether the future looks even brighter than the past. I will be looking at earnings excluding extraordinary items to exclude one-off activities to get a better understanding of the underlying drivers of earnings.

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See our latest analysis for Greggs

Market analysts' consensus outlook for this coming year seems optimistic, with earnings rising by a robust 29%. This growth seems to continue into the following year with rates reaching double digit 40% compared to today’s earnings, and finally hitting UK£101m by 2022.

LSE:GRG Past and Future Earnings, May 21st 2019

Although it’s informative understanding the growth rate each year relative to today’s figure, it may be more insightful analyzing the rate at which the company is moving every year, on average. The pro of this method is that it removes the impact of near term flucuations and accounts for the overarching direction of Greggs's earnings trajectory over time, which may be more relevant for long term investors. To calculate this rate, I've appended a line of best fit through analyst consensus of forecasted earnings. The slope of this line is the rate of earnings growth, which in this case is 14%. This means, we can anticipate Greggs will grow its earnings by 14% every year for the next couple of years.

Next Steps:

For Greggs, there are three pertinent factors you should further research:

  1. Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
  2. Valuation: What is GRG worth today? Is the stock undervalued, even when its growth outlook is factored into its intrinsic value? The intrinsic value infographic in our free research report helps visualize whether GRG is currently mispriced by the market.
  3. Other High-Growth Alternatives: Are there other high-growth stocks you could be holding instead of GRG? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!

We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.

If you spot an error that warrants correction, please contact the editor at editorial-team@simplywallst.com. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.